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Yes, There May Be More Pain To Come For The Stock Market
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN AAPL, V, MA, TSLA,
So I’ll admit when I said yesterday to be careful that the rally was a game of fill the gap, I surely was not expecting this type of sell-off today. I will also admit when I wrote on Friday that it could get a lot better or a lot worse and that we would find out starting Monday, again I didn’t expect this type of sell-off.
Oh, by the way, the ECB is at bat tomorrow. Yeah, those currency and rates are gonna be a little volatile.
For the first time today, I actually started to feel nervous. So if you are nervous you are not alone. It is normal. It probably won’t comfort you either to hear me say I’m no longer certain of what is happening. Although I have a theory, which I will get too. First, let’s go through the checklist of items that we have followed: Yields, China, the dollar, the Canaries.
Yields on the 10-year are back to 3.1%. China although not better, has not gotten considerably worse. The dollar is still below its August highs, and again as we have said it confirms our belief that higher yields are not in the future. Visa and Mastercard have not reached their prior lows. In fact, Visa just reported and is still higher than those lows.
So when we look at the groups that got hammered today. The IBB was down nearly 6%! The XBI was down nearly 7%. The semis with the SMH and SOXX were both down more than 6%. Technology, XLK is down more than 4%.
Turn Those Machines Back On!
Today’s sell-off felt a lot an ALGO and ETF negative feedback loop. Really. It sounds so dumb I know. But remember how ETF’s work. Sell the ETF —> then you have to sell the stocks in the basket —> stock prices go down —> then the ETF goes down —> Start all over again. All the dumb 15% of volume and VWAP ALGO’s just go along playing a game of catch up. A dumb theory, I know. But that is what I think. It’s the Machines gone wild.
I know it doesn’t make you feel better. I’m sorry…
S&P 500 (SP500, SPX)
Now that S&P 500 has fallen into the zone of no return, it looks like we may be heading to 2,620. So from a positive standpoint, the RSI didn’t reach a new low. Perhaps an indication momentum will start to turn.
The next level on the NASDAQ to watch for is the 7,026. Again, RSI didn’t make a new low.
Semis (SOXX, SMH)
I am watching the semis closely, to see if they start to provide a positive signal, and for that, I watch the SOXX and SMH. Watch for support $85 in the SMH.
On the verge of a profitable quarter, really Elon? Tesla wasn’t only profitable! They were GAAP profitable! They reported an Adjusted Profit of $2.90 per share, that was better than estimates by $2.97 per share! They had GAAP Net Income of $312 million.
Tesla is trading around $322 after hours and could be on its way to $350.
AMD, I feel bad. I really do. I know a lot of people had big hopes that this time it would be different. But it is not, and now the stock is trading at $17.80 in the after hours. I have written since $34 this stock was going to fall, and unfortunately $17 later it is still falling. I think it still has further to fall, probably to $16.
We might as look as Nvidia. This is a complete disaster too and AMD is not going to help them. $180 becomes a real possibility.
The Apple buyer is back today. Sure, why not, the guy has been sitting at this $215 level for months now just sucking up every share that comes his way. Today was no different. I’m getting a bit worried that this level may not hold forever. If it doesn’t watch for $209. Especially now that MarketWatch published my post on this topic. Jinx! By the way, THANK YOU MARKETWATCH!
Facebook fell below support at $148.75. We could be looking at a drop to $140.
Micron – $34 is now likely.
Roku heading to $48.
Amazon looks to be going to $1620.
I am afraid there may be more some pain. I don’t think this carnage is over. Not yet.
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.
SP500, tesla, amazon, nasdaq, facebook, amd, nvidia, micron, roku, apple